PENGROWTH ENERGY $3.35 - Toronto symbol PGF

PENGROWTH ENERGY $3.35 (Toronto symbol PGF; Shares outstanding: 530.1 million; Market cap: $1.8 billion; TSINetwork Rating: Average; Dividend yield: 14.3%; www.pengrowth.com) has started injecting steam into its Lindbergh oil sands project in Alberta to loosen the tar-like bitumen and pump it to the surface.

Pengrowth believes that Lindbergh’s low operating costs will let it generate positive cash flow, even at today’s depressed oil prices.

As well, now that construction on Lindbergh has ended, the company’s 2015 capital spending will fall sharply from the $740 million to $770 million it probably spent in 2014.

Lower capital spending will help the company maintain its monthly dividend of $0.04 a share, which yields 14.3% on an annualized basis.

In the nine months ended September 30, 2014, dividends totalled 48.7% of Pengrowth’s cash flow. However, 21% of its shareholders chose to receive additional shares instead of cash, which lowered its payout ratio to 38.5%.

Pengrowth is still a buy.

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